GIFT City funds vs international mutual funds: Returns, minimum investment and tax compared
Indian investors seeking exposure to overseas equities have fewer choices among conventional international mutual funds, as several schemes are not accepting fresh investments.
GIFT City funds offer an alternative to international mutual funds, many of which remain closed to fresh investments after the Reserve Bank of India (RBI) imposed a $7 billion industry-wide limit on overseas investments by domestic mutual funds. The cap has constrained fresh investments in several schemes, including those tracking the S&P 500 and Nasdaq-100.
Set up in the International Financial Services Centre (IFSC) at Gujarat International Finance Tec-City, GIFT City funds operate under a separate regulatory framework and do not count towards the $7 billion limit. Here’s what investors need to know.
Investing through GIFT City requires investors to remit money in foreign currency under the Liberalised Remittance Scheme (LRS). Under the RBI's LRS framework, resident individuals can remit up to $250,000 per financial year for permitted current and capital account transactions, including eligible overseas investments.
While international mutual funds often allow investments starting at ₹100 and offer SIP facilities, the minimum subscription amounts for GIFT City schemes are higher: $500 for the Parag Parikh S&P 500 and Nasdaq 100 funds and $5,000 for several other schemes.
Taxation also differs. International mutual funds are taxed according to the applicable rules for specified mutual funds. For units acquired on or after April 1, 2023, gains are generally taxed at the investor's applicable income-tax slab rate.
For the GIFT City schemes, tax is levied at the fund level, with rates of 14.95% on long-term gains (holding period of more than 24 months), 42.74% on short-term gains (holding period of less than 24 months), and 35.88% on dividends. “Tax will be paid at the fund level on income arising to the Fund. There should not be any tax in the hands of investors on gains at the time of redemption in India,” the DSP Factsheet mentioned.
| GIFT City fund | Fund type / investment strategy | Minimum investment | Period | Fund returns | Benchmark | Benchmark returns |
| DSP Global Equity Fund | Active equity fund | $5,000 | Since inception (18 Sep 2025) | 8.49% | MSCI ACWI | 17.49% |
| Parag Parikh S&P 500 Fund of Fund | Passive fund of funds investing in Invesco S&P 500 UCITS ETF (Acc) | $500 initial; $500 top-up | Since inception (20 Mar 2026) | 18.89% | S&P 500 Net Total Return Index | 18.08% |
| Parag Parikh Nasdaq 100 Fund of Fund | Passive fund of funds investing in Invesco Nasdaq-100 Swap UCITS ETF (Acc) | $500 initial; $500 top-up | Since inception (20 Mar 2026) | 27.95% | Nasdaq 100 Notional Net Total Return Index | 27.53% |
| Edelweiss Greater China Equity Fund | Passive FOF investing in JPMorgan Funds – Greater China Fund | $10,000; $500 top-up | Since inception (10 Mar 2026) | 6.47% | NA | NA |
| Marcellus Global Equities Fund | Active global equity fund | $5,000 initial; $2,000 top-up | Since inception (25 Jun 2026) | -1.27% | S&P 500 Net Total Return Index | 4.19% |
| HDFC International Developed Markets Equity Fund | Passive fund of funds | $5,000 | Since inception (27 Aug 2026) | -1.01% | MSCI World Net Return Index (USD) | -1.69% |
| HDFC International Emerging Markets Equity Fund | Passive fund of funds | $5,000 | Since inception (27 Aug 2026) | -0.37% | MSCI Emerging Markets Net Return Index (USD) | -0.76% |
*Source: Fund's latest factsheets, Direct plans, Returns as on 30 September 2026
Among the available options, the Parag Parikh S&P 500 Fund of Fund and Nasdaq 100 Fund of Fund provide passive exposure to two major US equity benchmarks. The S&P 500 scheme has delivered 18.89% since inception, against 18.08% for its benchmark, the S&P 500 Net Total Return Index.
The Nasdaq 100 scheme had returned 27.95%, compared with 27.53% for the Nasdaq 100 Notional Net Total Return Index.
For investors seeking active management, DSP Global Equity Fund's return since inception was 8.49%, compared with 17.49% for the benchmark.
Other available options include the Edelweiss Greater China Equity Fund, which invests in the JPMorgan Funds – Greater China Fund and has delivered a 6.47% return since inception.
Marcellus Global Equities Fund, an active scheme, reported a return of -1.27% since June 25, 2026, compared with 4.19% for the S&P 500 Net Total Return benchmark.
HDFC also offers International Developed Markets Equity Fund and International Emerging Markets Equity Fund through GIFT City. Their returns since inception were -1.01% and -0.37%, respectively.
Domestic schemes offer a simpler investment process, rupee-based transactions, and SIP facilities, with funds delivering higher returns than GIFT City funds. However, restrictions on fresh investments remain a constraint for investors seeking global exposure.
| International Mutual Fund | 6-month returns (%) | 1-year returns (%) |
| Nippon India Taiwan Equity Fund | 1.47% | 97.94% |
| Baroda BNP Paribas Aqua FoF | -1.91% | 9.36% |
*Source: Value Research, Direct plans, Returns as on 21 October 2026
Nippon India Taiwan Equity Fund leads the category and recorded a one-year return of 97.94% but remained closed to fresh investments. Baroda BNP Paribas Aqua Fund of Fund, which is open for fresh investments, has delivered a 9.36% return over a 1-year period.
Sheetal Goel is a Content Producer at Livemint, where she covers corporate developments, personal finance, business trends, markets, and SEBI-related updates. She focuses on simplifying complex financial concepts and presenting them in a clear, reader-friendly manner, thereby helping audiences better understand investment trends, personal finance, and market developments. Her writing focuses on making finance more accessible to everyday readers while maintaining clarity, accuracy, and relevance. <br><br> She holds a degree in Economics (Hons.) along with an MBA in Finance, which has helped her develop a strong foundation in financial analysis, market understanding, and business reporting. Before joining journalism, she worked with finance and broking firms, where she closely followed market developments, investment strategies, and evolving industry trends. This practical exposure strengthened her understanding of financial markets. She has also written content across multiple formats and platforms, including YouTube, LinkedIn, and Instagram. <br><br> Over time, she has developed expertise in covering market-linked stories, investor-focused topics, and regulatory updates in a simplified yet informative style. She also enjoys reading and listening to Hindi poetry, reflecting her appreciation for literature and creative expression beyond the world of markets and numbers.
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